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2020 (10) TMI 28 - AT - Income TaxIncome from other sources - addition u/s 56(2)(viib) - difference between the fair market value and the issue price of shares at a premium as income of the Assessee - FMV determination - shares are issued at a premium and at a value higher than the fair market value - adoption of the fair market value as per the two methods i.e., either DCF method or fair market value of the unquoted equity shares determined by a merchant banker - HELD THAT:- Fair market value may be determined with such method as may be prescribed or the fair market value can be determined to the satisfaction of the AO. Provisions of Rule 11UA(2)(b) of the Rules provides that, the Assessee can adopt the fair market value as per the above two methods i.e., either DCF method or fair market value of the unquoted equity shares determined by a merchant banker. The choice of method is that of the Assessee. The Tribunal has followed the judgment of Vodafone M-Pesa Ltd., Vs. Pr. CIT [2018 (3) TMI 530 - BOMBAY HIGH COURT] and has taken the view that the AO can scrutinize the valuation report and he can determine a fresh valuation either by himself or by calling a determination from an independent valuer to confront the Assessee but the basis has to be DCF method and he cannot change the method of valuation which has been opted by the Assessee. Issue with regard to valuation has to be decided afresh by the AO on the lines indicated in the decision of ITAT, Bangalore in the case of VBHC Value Homes Pvt. Ltd. [2020 (6) TMI 318 - ITAT BANGALORE]i.e., (i) the AO can scrutinize the valuation report and he can determine a fresh valuation either by himself or by calling a determination from an independent valuer to confront the assessee but the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee. (ii) For scrutinizing the valuation report, the facts and data available on the date of valuation only has to be considered and actual result of future cannot be a basis to decide about reliability of the projections. The primary onus to prove the correctness of the valuation Report is on the assessee as he has special knowledge and he is privy to the facts of the company and only he has opted for this method. Hence, he has to satisfy about the correctness of the projections, Discounting factor and Terminal value etc. with the help of Empirical data or industry norm if any and/or Scientific Data, Scientific Method, scientific study and applicable Guidelines regarding DCF Method of Valuation. The order of ld.CIT(A) is accordingly set aside and this issue is remanded to the AO for decision afresh, after due opportunity of hearing to the Assessee. - Assessee appeal is allowed for statistical purposes.
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